EXHIBIT 10.7
THIS SHARE PURCHASE AGREEMENT dated the 11th day of April, 2001,
AMONG:
AQUASOURCE INC., a Delaware corporation
OF THE FIRST PART
- and -
SPARKLING SPRING WATER HOLDINGS LIMITED, a body corporate,
amalgamated under the laws of Nova Scotia
OF THE SECOND PART
WHEREAS AquaSource Inc. is the registered and beneficial holder of all
of the issued and outstanding shares in the capital of Pure Water Corporation,
Polaris Water Company Inc. and Stellen Investments Ltd.;
AND WHEREAS Sparkling Spring Water Holdings Limited desires to buy and
AquaSource Inc. desires to sell all of the issued and outstanding shares in the
capital of Pure Water Corporation, Polaris Water Company Inc. and Stellen
Investments Ltd. for the purchase price and upon the terms and conditions
hereinafter set forth;
NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the
covenants, agreements, warranties and payments hereinafter set forth and
provided for, the parties hereto covenant and agree as follows:
ARTICLE 1. INTERPRETATION
1.1 DEFINITIONS
Whenever used in this Agreement, the following words and phrases shall
have the respective meanings ascribed to them as follows:
(a) "Accounts Receivable" means all trade accounts receivable of
the Corporations (for greater certainty, trade accounts
receivable shall not include accounts receivable from
Affiliates) which are collected by the Corporations within 120
days following the Closing Date and which arose with respect
to the period of time prior to the Closing Date;
(b) "Affiliate" means, with respect to any individual, any
corporation directly or indirectly controlled by that
individual; and with respect to
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any corporation, any other corporation which directly or
indirectly controls or is controlled by or is under direct or
indirect common control with such first mentioned corporation
or any corporation which is directly or indirectly controlled
by a corporation which controls the first mentioned
corporation. For the purpose of this definition "control" or
"controlled" means, with respect to any corporation, the
ownership of such of the voting shares of such corporation as
are sufficient to elect a majority of the board of directors;
(c) "Agreement" means this Share Purchase Agreement and any
instrument amending this Agreement as referred to in paragraph
12.7 below; "hereof", "hereto" and "hereunder" and similar
expressions mean and refer to this Agreement and not to a
particular article or paragraph; and the expression "Article"
or "paragraph" followed by a number means and refers to the
specified article or paragraph of this Agreement;
(d) "Assumed Contract" means any contract of a Corporation listed
in the Schedules to this Agreement that is not a Terminated
Contract.
(e) "Assumed Liabilities" means all of the Liabilities of the
Corporations which are included in the Net Liquid Asset
Statement;
(f) "Business" means, in respect of the Corporations, the business
currently and heretofore carried on by the Corporations in the
States of Washington and Idaho, United States of America, and
the Province of British Columbia, Canada, consisting of the
producing, bottling, distribution and sale of water and other
beverages and the sale and rental of water coolers;
(g) "Business Day" means a day other than a Saturday, Sunday or
any other day on which the principal chartered banks located
at the Cities of Halifax, Vancouver or Seattle, Washington are
not open for business during normal banking hours;
(h) "Closing" means the completion of the sale to and purchase by
the Purchaser of the Purchased Shares and the other
transactions hereunder more particularly described in Article
10;
(i) "Closing Date" means the later of May 16, 2001 or 7 days after
the waiver or satisfaction of the conditions precedent set out
in paragraphs 9.1(j) and 9.2(e) hereof or such earlier or
later date as mutually agreed upon, provided in no event shall
the Closing be later than May 31, 2001;
(j) "Corporation" means any of:
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(i) Pure Water Corporation, a Washington corporation;
(ii) Polaris Water Company Inc., a body corporate
continued under the laws of the Yukon;
(iii) Canadian Polaris Water Company, Inc., a body
corporate incorporated under the laws of British
Columbia, a wholly-owned subsidiary of Polaris Water
Company Inc.;
(iv) Cool Water - Water Ind. Ltd., a body corporate
incorporated under the laws of British Columbia, a
wholly-owned subsidiary of Polaris Water Company
Inc.;
(v) Pallas Water Company Inc., a body corporate
incorporated under the laws of British Columbia, a
wholly-owned subsidiary of Polaris Water Company
Inc.;
(vi) Ever Clear Water Company Ltd., a body corporate
incorporated under the laws of British Columbia, a
wholly-owned subsidiary of Polaris Water Company
Inc.;
(vii) Stellen Investments Ltd., a company continued under
the laws of the Yukon;
(viii) Whistler Water Inc., a company continued under the
laws of the Yukon, a wholly-owned subsidiary of
Stellen Investments Ltd.;
(ix) World Choice Bottling Corp., a company continued
under the laws of the Yukon, a wholly-owned
subsidiary of Stellen Investments Ltd.;
all of which are herein collectively referred to as the
"Corporations";
(k) "Customer" means a person who deals at arm's length with the
Vendor and the Corporations who is a customer of one of the
Corporations and whose residence or place of business, as the
case may be, is on one of the regular delivery routes of the
Corporations;
(l) "Deferred Revenue" means all deferred revenue of the
Corporations (whether or not included in the Financial
Statements) including water cooler rental revenue, unearned
water revenue, unearned coupons and unearned monthly rental
xxxxxxxx, calculated as follows, with a liability recorded for
the unearned portion:
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(i) any "front loaded" rental payments received from
water coolers will be averaged and pro rated on an
equal monthly basis over the term of the rental
contract;
(ii) any unearned monthly rental xxxxxxxx will be pro
rated as of the day of Closing;
(iii) any unearned coupon revenues will be adjusted based
on the amount of coupons which are redeemed during
the period commencing on the Closing Date and ending
120 days following the Closing Date;
(iv) cash or credit received for production or product not
yet delivered;
(m) "Draft Statement" has the meaning ascribed by paragraph 5.1
hereof;
(n) "Environment" means all components of the earth and any
elements thereof, including land, soil and subsoil, air,
water, any layer of the atmosphere, any organic or inorganic
matter and any living organism including humans;
(o) "Environmental Laws" means all applicable laws, governmental
orders, all contract obligations and all common law relating
to the Environment, including those relating to pollution,
health or safety of the Environment, as well as emissions,
wastewater, discharges, releases or threatened releases of
Hazardous Materials into the Environment or otherwise related
to the manufacture, processing, distribution, use treatment,
storage, disposal, transport or handling of Hazardous
Materials;
(p) "Escrow Amount" has the meaning assigned to that term in
paragraph 10.2.5;
(q) "Escrow Agreement" means the Escrow Agreement attached hereto
as Schedule 16;
(r) "Financial Statements" means the unaudited internally prepared
financial statements of the Corporations (which shall be
unconsolidated except insofar as such statements shall be
consolidated with respect to Polaris Water Company Inc.,
Canadian Polaris Water Company Inc., Cool Water - Water Ind.
Ltd., Pallas Water Company Inc. Ever Clear Water Company Ltd.,
Stellen Investments Ltd., Whistler Water Inc. and World Choice
Bottling Corp.) as at the Financial Year
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End consisting of the balance sheet of each of the
Corporations as at the Financial Year End and the accompanying
statements of income, retained earnings and changes in cash
flows for the twelve month period then ended, prepared in
accordance with generally accepted accounting principles
(except as noted in Schedule 1) and certified by the Chief
Financial Officer of the Vendor, together with unaudited
internally prepared financial statements of the Corporations
dated as of the month ending not less than 20 days before the
Closing occurs, copies of which are annexed hereto as Schedule
1;
(s) "Financial Year End" means December 31, 2000;
(t) "Hazardous Materials" means any contaminants, pollutants,
substances, chemicals, elements or hazardous wastes, which are
regulated, restricted or designated as such under any
applicable Environmental Laws, including such materials that
are regulated as hazardous or toxic substances or materials,
infectious wastes, radioactive materials, petroleum (including
crude oil or any fraction thereof), asbestos fibers, PCB's or
solid wastes;
(u) "Inventory" means all small pack product, raw materials and
finished goods inventories of the Corporations which are
saleable or resaleable in the Ordinary Course of the Business
for the purpose for which they were intended and which were
produced within 60 days of the Closing Date valued at the
lower of Standard Floor Cost or current market value
associated with such inventory, provided that for the purposes
herein, water coolers, parts, crates, racks, 3 and 5-gallon
bottles and other items of similar nature are all deemed to be
fixed assets and are expressly excluded from this definition;
(v) "IRC" means the Internal Revenue Code of 1986, as amended, or
any successor law, and regulations issued by the United States
Internal Revenue Service to that Code, or a successor law;
(w) "ITA" means the Income Tax Act (Canada) as amended from time
to time;
(x) "Lease Payouts" means, with respect to any operating or
capital leases of assets used in the Business (excluding the
Real Property Leases), all payments required to give the
Corporations at Closing legal and beneficial ownership of
those assets free and clear of all encumbrances, and shall
include all payouts, fees, penalties and other payments
required for early payout provided that the Purchaser may
elect, at its sole discretion, to retain certain leases and,
in such case, there shall be included in this definition an
amount equal to the net present value of the remaining future
lease payments and residual payment of such lease
PAGE 5
using a discount rate of 10% provided that in no event shall
such amount be greater than the actual lease payout of such
lease;
(y) "Leased Property" shall mean the real property leased by the
Corporations;
(z) "Liabilities of the Corporations" means all debts, liabilities
and obligations of the Corporations existing at the Closing
Date, of any kind whatsoever, including, without restriction,
current liabilities of the Corporations, including accounts
payable of the Corporations to all suppliers and customers,
the current portion of long term debt, Deferred Revenue,
accrued current liabilities, bottle deposits, accrued employee
bonuses and wage accounts, vacation pay and sick leave, and
current income tax payable and all Non-Current Liabilities,
whether or not disclosed in the Financial Statements, all
determined in accordance with generally accepted accounting
principles, except those expressly modified herein;
(aa) "Liquid Assets" means the sum of the following assets of the
Corporations:
(i) Cash;
(ii) Accounts Receivable; and
(iii) Inventory;
(bb) "Losses" has the meaning ascribed by paragraph 11.1 hereof;
(cc) "material" or "materially", for disclosure purposes only in
Article 6, means an event, fact, circumstance, term, right,
permit, obligation, agreement or other matter that has
financial consequences to the Corporations individually or in
the aggregate of at least $50,000;
(dd) "Net Liquid Assets" means the difference between:
(i) Liquid Assets; and
(ii) Assumed Liabilities;
(ee) "Net Liquid Assets Statement" has the meaning set out in
paragraph 4.3;
(ff) "Non-Current Liabilities" means all debts, liabilities and
obligations of the Corporations existing at the Closing Date,
of any kind whatsoever including, without restriction, bank
debt, shareholders' loans, capitalized
PAGE 6
leases and Lease Payouts, whether or not disclosed in the
Financial Statements, excluding the current liabilities of the
Corporations;
(gg) "Ordinary Course of Business" when used in relation to the
conduct by a Corporation of its Business, means:
(i) any activity of such corporation, consistent with the
past practices of such corporation conducted in a
commercially reasonable manner, having no unusual or
special features;
(ii) such action is not required to be authorized by the
Board of Directors of such corporation (or by any
person or group of persons exercising similar
authority); and
(iii) such action is of similar nature and magnitude to
actions customarily taken, without any authorization
by the Board of Directors (or by any person or group
of persons exercising similar authority), in the
ordinary course of the normal day-to-day operations
of such corporation that are in the same line of
business as the Corporations;
(hh) "Person" means any individual, corporation, partnership,
trustee or trust or unincorporated association or such
person's heirs, executors, administrators or assigns, as the
case may be; and pronouns have a similar extended meaning;
(ii) "Promissory Note" means the Promissory Note attached hereto as
Schedule 27, as described in paragraph 4.2(b);
(jj) "Purchaser" means Sparkling Spring Water Holdings Limited, a
body corporate, amalgamated under the laws of Nova Scotia;
(kk) "Purchase Price" means the purchase price payable to the
Vendor for the Purchased Shares provided for in Article 4;
(ll) "Purchased Shares" means the following issued and outstanding
shares, namely:
(i) 1,055 Class A common shares and 3,165 Class B common
shares of Pure Water Corporation;
(ii) 1,520,048 common shares of Polaris Water Company
Inc.;
(iii) 1,520,057 common shares of Stellen Investments Ltd.
(mm) "Purchaser's Solicitors" means Xxxxxxx XxXxxxxx Stirling
Scales, a law firm of Halifax, Nova Scotia;
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(nn) "Real Property" means the real property owned by the
Corporations and described in Schedule 5 attached hereto;
(oo) "Section 116 Certificate" means a certificate issued by Canada
Customs and Revenue Agency under Section 116(2) of the ITA;
(pp) "Standard Floor Cost" means with respect to the valuation of
Inventory, the actual cost of raw materials and the direct
labour cost used in production of the Inventory;
(qq) "Terminated Contract" means a contract of a Corporation listed
in the Schedules that is designated in the Schedules as being
a contract that will be terminated by the Corporation at or
prior to Closing;
(rr) "Subsidiary" shall have the meaning ascribed thereto in the
Canada Business Corporations Act (Canada) as amended from time
to time;
(ss) "Time of Closing" means 10:30 o'clock in the forenoon (Seattle
time) on the Closing Date or such other time on such date as
the parties may agree as the time at which the Closing shall
take place;
(tt) "Vendor" means AquaSource Inc., a Delaware corporation;
(uu) "Vendor's Knowledge" means where reference is made to the
Vendor's knowledge or awareness throughout this Agreement -
the actual knowledge of the Vendor after having made due
inquiry of the financial, production and marketing managers
employed by each of the Corporations;
(vv) "Vendor's Solicitors" means Stoel Rives LLP, a law firm with
an office in Seattle, Washington;
(ww) "Water Agreements" means agreements, licenses or permits
issued in favour of each of the Corporations with respect to
that Corporation's right to obtain water for its Business
including, without restriction, the water supply agreements,
licenses and permits attached in Schedule 19;
(xx) "Water Cooler Rental Customer" means a Customer who has on
rent on commercially reasonable terms, pursuant to a valid,
enforceable contract, at least one cooler and has otherwise
purchased and paid for water and made required rental payments
within the 90 day period immediately prior to Closing;
(yy) "Water Only Customer" means a Customer who has purchased and
paid for water on commercially reasonable terms within the 90
day period prior to Closing.
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1.2 GENDER AND NUMBER
In this Agreement, words importing the singular include the plural and
vice versa and words importing a specific gender include all genders.
1.3 CURRENCY
Unless otherwise indicated, all dollar amounts referred to in this
Agreement are in United States dollars.
1.4 ACCOUNTING PRINCIPLES
Whenever in this Agreement reference is made to generally accepted
accounting principles, such reference shall be deemed to be to:
(a) the generally accepted accounting principles from time to time
approved by the Canadian Institute of Chartered Accountants,
or any successor institute, at the date in question,
consistently applied, with respect to Corporations which are
resident in Canada;
(b) United States generally accepted accounting principles
applicable as at the date in question, consistently applied,
with respect to Pure Water Corporation; and
(c) except with respect to historical financial information
provided by the Corporations in the Schedules, as modified by
the specific definitions and agreements set out herein
including, without restriction, the definitions associated
with the Net Liquid Assets Statement.
1.5 HEADINGS/INTERPRETATION
The division of this Agreement into Articles and paragraphs and the
insertion of headings are for convenience of reference only and shall not affect
the construction or interpretation of this Agreement. Unless stated otherwise in
this Agreement, references in this Agreement to paragraphs, Schedules and
Exhibits are references to paragraphs, Schedules and Exhibits attached to this
Agreement. Each Schedule to this Agreement is, by this reference, incorporated
in this Agreement. Unless otherwise expressly provided the word "including" does
not limit the preceding words or terms.
ARTICLE 2. SCHEDULES
2.1 DESCRIPTION OF SCHEDULES
The following are the Schedules attached to and incorporated in this
Agreement by reference and deemed to be a part hereof:
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Schedule 1 - Financial Statements
Schedule 2 - Information Regarding the Corporations
Schedule 3 - Description of Employment, Union, Pension and Other
Similar Agreements
Schedule 4 - Names, salaries, etc. of Employees
Schedule 5 - Real Property
Schedule 6 - Conditional Sales Contracts and Other Encumbrances
Schedule 7 - Insurance Policies
Schedule 8 - Leases
Schedule 9 - Other Material Contracts
Schedule 10 - Non-Arm's Length Contracts
Schedule 11 - Litigation
Schedule 12 - Banking Information
Schedule 13 - Trademarks, Patents, Owned Software and Licensed Software
Schedule 14 - Dividends, Redemptions, etc.
Schedule 15 - Assets of the Corporations
Schedule 16 - Escrow Agreement
Schedule 17 - Loans to Directors/Affiliates
Schedule 18 - Preferred Customers
Schedule 19 - Water Agreements
Schedule 20 - Capital Expenditures
Schedule 21 - Officers' Certificates
Schedule 22 - Opinion of Vendor's Solicitors
Schedule 23 - Opinion of Purchaser's Solicitors
Schedule 24 - Environmental Matters
Schedule 25 - Certain Disclosures
Schedule 26 - Promissory Note
ARTICLE 3. AGREEMENTS FOR PURCHASE AND SALE
3.1 AGREEMENTS OF PURCHASE AND SALE
Subject to the terms and conditions hereof, including the requirement
that the boards of directors of the Vendor and the Purchaser approve this
transaction, the Vendor agrees to sell, assign and transfer to the Purchaser and
the Purchaser agrees to purchase the Purchased Shares.
ARTICLE 4. PURCHASE PRICE
4.1 AMOUNT OF PURCHASE PRICE
The aggregate Purchase Price payable by the Purchaser to the Vendor for
the Purchased Shares and the Vendor's non-competition covenant provided in
Article 13 shall be the sum of Twenty Three Million Dollars ($23,000,000) (the
"Purchase
PAGE 10
Price"), the Purchase Price to be subject to adjustment according to
this Article 4 and Article 5. The Purchase Price shall be allocated as follows:
(a) Fifteen Million Four Hundred Ten Thousand Dollars
($15,410,000) to Pure Water Corporation, of which Three
Million, Eighty Two Thousand Dollars ($3,082,000) is allocated
to the non-competition covenant provided in Article 13;
(b) Seven Million Five Hundred Ninety Thousand Dollars
($7,590,000) to Polaris Water Company Inc. and Stellen
Investments Ltd. of which One Million Five Hundred Eighteen
Thousand Dollars ($1,518,000) is allocated to the
noncompetition covenant provided in Article 13.
4.2 The Purchase Price payable by the Purchaser to the Vendor for the
Purchased Shares shall be payable at the Time of Closing as follows:
(a) deposit by the Purchaser of the Escrow Amount with the Escrow
Agent (as defined in the Escrow Agreement) to be held and
distributed in accordance with the terms of the Escrow
Agreement;
(b) delivery by the Purchaser to the Vendor at the Closing of the
Promissory Note in the amount of Three Million Dollars
($3,000,000), or such lesser or greater amount as shall result
from the adjustment to the Purchase Price prior to the Time of
Closing as provided in Article 5; and
(c) the balance, as adjusted by Article 5 if applicable, by wire
transfer of immediately available funds to such account or
accounts as the Vendor shall have notified the Purchaser not
less than three days prior to the Closing Date.
4.3 Within one hundred and thirty (130) days following the Closing
Date, the Purchaser shall submit to the Vendor a Net Liquid Assets statement of
the Corporations as of the close of business on the Closing Date (the "Net
Liquid Assets Statement") which shall be prepared by the Purchaser and certified
by its Chief Financial Officer, and which shall present fairly the Net Liquid
Assets of the Corporations as of the close of business on the Closing Date
taking into account the transactions contemplated at Closing pursuant to this
Agreement. The Net Liquid Assets Statement shall be prepared in accordance with
generally accepted accounting principles. Within twenty (20) days after receipt
of the Net Liquid Assets Statement the Vendor shall advise the Purchaser in
writing that the Vendor either (i) agrees with the Net Liquid Assets Statement
or (ii) does not agree with the Net Liquid Assets Statement, in which event the
Vendor shall set forth in reasonable detail the basis for such disagreement. The
Vendor shall have access to the books and records of the Corporations for the
purposes of assisting in its review of the Net Liquid Assets Statement. In the
event of a disagreement, the Purchaser and the Vendor agree to use
PAGE 11
their respective best efforts to resolve any disagreements with respect to the
Net Liquid Assets Statement; provided, however, that if the Purchaser and the
Vendor fail to reach agreement on the Net Liquid Assets Statement within twenty
(20) days after the date such dispute arose, then such disagreement with the
disputed items shall be resolved by a single arbitrator who shall be an audit
partner of PricewaterhouseCoopers LLP. Such arbitrator shall be selected by the
parties acting reasonably and in good faith from the Vancouver office of
PricewaterhouseCoopers LLP. The place of the arbitration shall be Vancouver,
British Columbia. The single arbitrator shall make his determination within two
(2) weeks of his engagement. The fees and expenses relating to the arbitration
shall be borne, in full, by the losing party. For greater certainty, the party
whose position respecting the Net Liquid Assets of the Corporations as of the
close of business on the Closing Date differs by the greatest amount from the
ruling of the single arbitrator shall be deemed to be the loser. The decision of
the single arbitrator shall be final and binding upon the Purchaser and the
Vendor.
4.4 The Vendor and the Purchaser hereby agree that if the Net Liquid
Assets of the Corporations as of the close of business on the Closing Date, as
reflected in the Net Liquid Assets Statement or in the decision of the single
arbitrator pursuant to paragraph 4.3, as the case may be, is more than
$1,800,000, the Purchase Price payable by the Purchaser to the Vendor for the
Purchased Shares as adjusted by the Draft Statement shall be increased on a
dollar for dollar basis by an amount (the "Increase Amount") equal to the
difference between the Net Liquid Assets of the Corporations as reflected in the
Net Liquid Assets Statement and $1,800,000. If the Net Liquid Assets of the
Corporations as of the close of business on the Closing Date, as reflected in
the Net Liquid Assets Statement or in the decision of the single arbitrator
pursuant to paragraph 4.3, as the case may be, is less than $1,500,000, the
Purchase Price payable by the Vendor for the Purchased Shares as adjusted by the
Draft Statement shall be decreased on a dollar for dollar by an amount (the
"Decrease Amount") equal to the difference between $1,500,000 and the Net Liquid
Assets of the Corporations as reflected in the Net Liquid Assets Statement. The
parties agree that any Increase Amount or any Decrease Amount shall adjust the
Purchase Price as allocated in paragraphs 4.1(a) and 4.1(b) to reflect the Net
Liquid Assets Statement.
4.5 Upon the Vendor and the Purchaser mutually agreeing to the Net
Liquid Assets Statement or upon receipt of the determination of the single
arbitrator in accordance with paragraph 4.3, as the case may be:
(a) the Purchaser agrees to pay to the Vendor the Increase Amount
with interest within ten (10) days; or
(b) the Vendor agrees to pay to the Purchaser the Decrease Amount
with interest within ten (10) days;
For greater certainty, the Vendor and Purchaser acknowledge that:
PAGE 12
(c) the interest on the Increase Amount or the Decrease Amount, as
the case may be, shall accrue at the rate of 7.5% per annum
from the Closing Date until paid in full to the extent the
Purchase Price has not at the time of Closing been adjusted as
provided in Article 5;
(d) any payments required above shall be net of any adjustments
previously made pursuant to Article 5.
4.6 With respect to any accounts receivable that do not form part of
the Accounts Receivable because they are not collected within 120 days following
Closing, unless the Purchaser otherwise agrees to purchase such accounts
receivable and includes the value thereof in the determination of Net Liquid
Assets, the Purchaser agrees promptly at the request of the Vendor to assign
such uncollected Accounts Receivable to the Vendor for the sum of $1.
4.7 The amount of the Purchase Price includes, and the Vendor shall be
liable for and shall pay and remit, all federal, provincial, state and municipal
sales taxes (including any retail sales taxes and transfer taxes) and all other
taxes, duties, transfer stamp, conveyance or other like charges of any
jurisdiction arising in connection with this Agreement and all other agreements
or documents delivered at Closing including the Non-Competition Agreements.
4.8 For the purposes of determining Net Liquid Assets, and for greater
certainty, the parties agree as follows:
(a) all liabilities associated with the close down and return of
the former Seattle plant to its landlord, shall have been paid
or accrued for and included as Assumed Liabilities in the Net
Liquid Assets Statement;
(b) all liabilities related to the current employees who are
terminated by the Vendor prior to the Closing or who otherwise
cease employment with the Corporations prior to or within 90
days following the Closing, except to the extent such
liabilities arise from unlawful actions taken by the Purchaser
following the Closing or except as provided in paragraph 4.10,
and all liabilities related to consulting or employment
agreements with any former employees or owners of the
Corporations shall be included as Assumed Liabilities in the
Net Liquid Assets Statement;
(c) any outstanding loans or advances at Closing from the Vendor
or any of its Affiliates to any of the Corporations shall, to
the extent not contributed to the capital of the Corporations
prior to the Closing Date, be included as Assumed Liabilities
in the Net Liquid Assets Statement;
(d) for the purpose of converting any Canadian assets and
liabilities to U.S. dollars, the parties agree that the
Canadian - United States dollar
PAGE 13
exchange rate to be used shall be the rate existing at the
last day of the month prior to the month in which the Closing
occurs as published in the Wall Street Journal; and
(e) any predetermined severance arrangement with employees,
including the six month severance with Xxxx Xxxxxx, who are
not terminated within 90 days of Closing and who have
otherwise not signed a new employment contract with the
Purchaser shall be included as Assumed Liabilities in the Net
Liquid Assets Statement.
4.9 EMPLOYEE COVENANTS
Effective as of the Closing Date, the Purchaser shall continue the
employment of such number of current employees of Pure Water Corporation (the
"Employees") on an "at-will" basis and at their then present rate of pay (with
such exceptions as the Purchaser shall identify to the Vendor not later than 7
days prior to the Closing Date) so as to not violate the WARN Act (as defined in
paragraph 4.10), including Employees (subject to such exceptions) who are absent
from work due to disability or illness or who are on approved leave of absence
or layoff status.
4.10 WARN AGREEMENTS
The Vendor shall indemnify the Purchaser against any and all liability,
damage or expense which the Purchaser suffers due to any plant closing or mass
layoff by the Vendor within the meaning of the Worker Adjustment Retraining
Notification Act, 29 U.S.C. xx.xx. 2101, et seq. ("WARN Act"), within the 90-day
period prior to the Closing Date. The Purchaser shall indemnify the Vendor
against any and all liability, damage or expense which the Vendor suffers due to
any plant closing or mass layoff by the Purchaser within the meaning of the WARN
Act, within the 90-day period after the Closing Date.
ARTICLE 5. ESTIMATE OF NET LIQUID ASSETS STATEMENT
5.1 ESTIMATE
The parties agree that at Closing, the Purchase Price shall be adjusted
by the estimated Net Liquid Assets as disclosed in a draft Net Liquid Assets
Statement (the "Draft Statement") certified by the Chief Financial Officer of
the Vendor which is based on the month end internal financial statements of the
Corporations for the month ending not less than 20 days before the Closing
occurs. The Chief Financial Officer of the Purchaser shall be consulted with and
have reasonable input into the finalization of the Draft Statement prior to
Closing.
PAGE 14
5.2 ADJUSTMENT
To the extent there is deemed to be an Increase Amount or Decrease
Amount, based on such Draft Statement, the parties agree that the Purchase Price
shall be adjusted as at Closing by adjusting the principal amount of the
Promissory Note for the amount of such Increase Amount or Decrease Amount, as
the case may be, but in agreeing to such adjustment, neither party is prevented
from disputing the determination of the Net Liquid Assets Statement in the
manner provided in paragraph 4.3 hereof. For greater certainty, the parties
agree that should the amount of the Decrease Amount, if any, exceed the
principal amount of the Promissory Note, the balance of the Decrease Amount
shall be deducted from the cash to be paid at Closing.
ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF THE VENDOR
6.1 VENDOR'S REPRESENTATIONS AND WARRANTIES
The Vendor hereby represents and warrants to the Purchaser as follows
and acknowledges that the Purchaser is relying on such representations and
warranties in connection with the transactions contemplated by this Agreement:
6.1.1 INCORPORATION AND ORGANIZATION OF THE CORPORATIONS
Each of the Corporations is a corporation duly incorporated or
continued and subsisting under the laws of its jurisdiction of incorporation or
continuance. No proceedings have been instituted or are pending for the
dissolution or liquidation of any of the Corporations or threatening its
existence. True and complete copies of the Articles of Incorporation or
Continuance and Bylaws or Memorandum and Articles of the Corporations are
attached hereto as Schedule 2. No further amendment to such Articles of
Incorporation and Bylaws or Memorandum and Articles have been filed or
authorized by the shareholders of the Corporations.
6.1.2 QUALIFICATION OF THE CORPORATIONS TO DO BUSINESS
Each of the Corporations has the necessary corporate power, authority
and capacity to own or lease its property and to carry on the Business as now
being conducted by it and is qualified to carry on the Business and is in good
standing under the laws of its jurisdiction of incorporation or continuance and
those jurisdictions described in Schedule 2, being the only jurisdictions in
which the failure to be so qualified could reasonably be expected to have a
material adverse impact on the Corporations.
6.1.3 AUTHORIZED CAPITAL
The authorized capital of each of the Corporations and the rights and
restrictions respecting such shares are set out in the Articles of Incorporation
and
PAGE 15
Bylaws or Memorandum and Articles of the Corporations attached hereto as
Schedule "2".
6.1.4 ISSUED SHARES
Of the authorized capital of each of Pure Water Corporation, Polaris
Water Company Inc. and Stellen Investments Ltd., the Purchased Shares (and no
more) have been duly and validly allotted and issued as fully paid and
non-assessable at Closing. All of the issued and outstanding shares in the
capital stock of Pure Water Corporation, Polaris Water Company Inc. and Stellen
Investments Ltd. are beneficially owned by and registered in the name of the
Vendor free and clear of all liens and encumbrances of any kind. The following
shares (the "Subsidiary Shares") (and no more) have been duly and validly
allotted and issued as fully paid and non-assessable and are beneficially owned
and registered in the following names, free and clear of all encumbrances:
- 100 Class A voting shares of Canadian Polaris Water Company Inc.
are owned by Polaris Water Company Inc.;
- 1,000 Class A voting shares of Ever Clear Water Company Ltd. are
owned by Polaris Water Company Inc.;
- 100 common shares and 200 Class B preferred shares of Cool Water -
Water Ind. Ltd. are owned by Polaris Water Company Inc.;
- 100 Class A voting shares of Pallas Water Company Inc. are owned
by Polaris Water Company Inc.;
- 100 Class A voting shares of Whistler Water Inc. are owned by
Stellen Investments Ltd.;
- 100 Class A voting shares of World Choice Bottling Corp. are owned
by Stellen Investments Ltd.;
The certificates evidencing the Purchased Shares and the Subsidiary Shares bear
no restrictive legends other than those related to compliance with applicable
securities laws.
6.1.5 DUE AUTHORIZATION AND TRANSFER OF SHARES
As at Closing, all necessary corporate action on behalf of the
Corporations has been or on or before the Closing will be taken to authorize the
due and valid transfer of the Purchased Shares from the Vendor to the Purchaser.
PAGE 16
6.1.6 NO OPTIONS
Other than pursuant to this Agreement no person, firm or corporation
has any agreement or option, including convertible securities, warrants or
convertible obligations of any nature, or any right capable of becoming an
agreement or option for the purchase of any of the shares (including the
Purchased Shares and the Subsidiary Shares) in the capital of the Corporations.
6.1.7 NO ISSUE OF SHARES OR CONVERTIBLE SECURITIES
No person, firm or corporation has any agreement or option or any right
capable of becoming an agreement or option, including convertible securities,
warrants or convertible obligations of any nature, for the purchase,
subscription or issuance of any unissued shares of the Corporations or of any
other securities of the Corporations.
6.1.8 FINANCIAL STATEMENTS
Except as disclosed in Schedule 25 hereof, the Financial Statements
have been prepared on a full accrual basis in accordance with generally accepted
accounting principles applied on a basis consistent with those of previous years
and present fairly in all material respects:
(a) all the assets, liabilities (whether accrued, absolute,
contingent or otherwise) and the financial condition of the
Corporations as at their respective dates; and
(b) the sales, earnings and results of operations of the
Corporations for the periods then ended.
The Vendor acknowledges that the Purchaser has placed considerable
reliance on the truth and accuracy of the Financial Statements in the
calculation and negotiation of the Purchase Price of the Purchased Shares.
6.1.9 BUSINESS CARRIED ON IN ORDINARY COURSE
The Business has been carried on in the Ordinary Course of Business
since the Financial Year End and none of the Corporations has, since the
Financial Year End, sold or otherwise disposed of any of its assets except in
the Ordinary Course of Business other than as set out in Schedule 25 hereto.
Since the Financial Year End there has been no change in the Business,
operations, affairs or condition of any of the Corporations, financial or
otherwise, arising as a result of any legislative or regulatory change,
revocation of any license or right to do business, fire, explosion, accident,
casualty, labour problem, flood, drought, riot, storm, or act of God, except
changes occurring in the Ordinary Course of Business and which, in the
aggregate, have not
PAGE 17
materially adversely affected and will not materially adversely affect the
Business, operations, affairs or condition of the Corporations.
6.1.10 ABSENCE OF UNUSUAL TRANSACTIONS
Except as disclosed in Schedule 25 hereto, since the date of the
Financial Year End, the Corporations have not:
(a) transferred, assigned, sold or otherwise disposed of any of
the assets shown in the balance sheets contained in the
Financial Statements except in the Ordinary Course of
Business;
(b) suffered an operating loss or any extraordinary loss, or
waived any rights of substantial value, or entered into any
commitment or transaction not in the Ordinary Course of
Business where such loss, rights, commitment or transaction is
or would be material in relation to the Corporations, or the
Business of either, as the case may be;
(c) except as disclosed in Schedule 6 hereto, mortgaged, pledged,
subjected to lien, granted a security interest in or otherwise
encumbered any of its assets except in the Ordinary Course of
Business; or
(d) except as expressly disclosed herein, authorized or agreed or
otherwise become committed to do any of the foregoing.
6.1.11 MINUTE BOOKS AND CORPORATE RECORDS
The corporate records and minute books of each of the Corporations
contain minutes of all meetings and copies of all resolutions passed by the
directors and shareholders of the Corporations since their incorporation or
continuance, which are complete and accurate in all material respects; all such
resolutions were duly passed and the registers of members and transfers,
registers of directors, of the Corporations are complete and accurate in all
material respects. There is in existence neither a shareholders' agreement nor a
unanimous shareholders' agreement governing the affairs of any of the
Corporations, or the relationships, rights and duties of its shareholders.
Schedule 2 sets out the names of the current officers and directors and of each
shareholder of record of the Corporations.
6.1.12 ACCURACY OF BOOKS AND RECORDS
Except as disclosed in Schedule 25, the books and records, financial
and otherwise, of each of the Corporations fairly and correctly set out and
disclose in all material respects the financial position of the Corporations as
at the date hereof and all material financial transactions of the Corporations
have been accurately recorded in such books and records as are maintained in the
Corporations' Head Office in Seattle, Washington with respect to Pure Water
Corporation and at Vancouver, British
PAGE 18
Columbia with respect to the other Corporations. Except as disclosed in Schedule
25, each of the Corporations makes and keeps accurate books and records
reflecting its assets and maintains internal accounting controls that provide
reasonable assurance that (i) transactions are executed with management's
authorization; (ii) transactions are recorded as necessary to permit preparation
of the Corporations' financial statements and to maintain accountability for
their assets; (iii) access to its assets is permitted only in accordance with
management's authorization, and (iv) the book records of its assets is compared
with its actual assets at reasonable intervals.
6.1.13 NO GUARANTEES, ETC.
The Corporations are not party to or bound by any agreement of
guarantee, indemnification, assumption or endorsement or any like commitment of
the obligations, liabilities (contingent or otherwise) or indebtedness of any
Person except as set out in Schedule 9.
6.1.14 NO DIVIDENDS, ETC.
Since its latest Financial Year End, none of the Corporations has
declared or paid or have been deemed under the ITA or IRC to have declared or
paid any dividend or declared or made any other distribution on any of its
outstanding securities except as set forth in Schedule 14 and has not redeemed,
purchased or otherwise acquired any of its outstanding securities or agreed to
do so except as set forth in Schedule 14.
6.1.15 PAYMENTS TO EMPLOYEES AND OTHERS
No payments have been made or authorized since the latest Financial
Year End by the Corporations to its officers, directors, shareholders or
employees, or to its former officers, directors, shareholders or employees or to
any Person not dealing at arms' length (as such term is construed under the ITA
or IRC) with any of the foregoing, except in the Ordinary Course of Business and
at the regular rates payable to them as salaries, pensions, bonuses, rents,
management fees or other remuneration of any nature, as described on Schedule 4.
6.1.16 CAPITAL EXPENDITURES
The capital expenditures of the Corporations and equipment maintenance
programs have been carried out by the Corporations in the Ordinary Course of
Business during the 120 day period prior to Closing except as described in
Schedule 20 hereof.
6.1.17 EMPLOYMENT MATTERS
(a) None of the Corporations is party to any written or oral
employment, service, union, pension, deferred profit sharing,
benefit, bonus or other similar agreement or arrangement
except as set forth and described in
PAGE 19
Schedule 3 hereto and none of such agreements contains any
specific agreement as to notice of termination or severance
pay in lieu thereof except as disclosed in the said Schedule
3. None of the Corporations is in arrears in the payment of
any contribution or assessment required to be made to any such
arrangement as is in effect, whether such payment be deferred,
contingent or otherwise. None of the Corporations has
employees who cannot be dismissed on three months notice or
less (except for reasons that are not legally permissible)
without further liability other than as set out in Schedule 4
hereto.
(b) The Corporations have not made any agreements with any labour
or trade union or employee association or made commitments to
or conducted negotiations with any labour or trade union or
employee association with respect to any future agreements.
The Corporations are not required to recognize any union or
employee association representing the employees or any agent
having bargaining rights for the employees, and the Vendor
after due enquiry of the officers of the Corporations is not
aware of any current attempts to organize or establish any
labour or trade union or employee association to represent any
of the employees of the Corporations. There is no labour
strike, dispute, slowdown or stoppage pending, or to the
knowledge of the Vendor, threatened.
(c) The names of each of the full and part-time employees of the
Corporations, their years of service, age (unless prohibited
by law), present salaries, commission plans and benefits and
job descriptions are set out in Schedule 4 hereto.
(d) The Corporations are not liable for any liabilities or damages
to any employee or former employee resulting from the
violation of any applicable employment law or employment
agreement.
(e) All levies, assessments and penalties made against the
Corporations pursuant to the workers' compensation legislation
in any jurisdiction in which the Business is conducted, have
been paid by the Corporations; and
(f) Except as included as Assumed Liabilities, the Corporations
are not liable for or obligated to pay any severance pay or
any other benefit by reason of the voluntary or involuntary
termination of the employment of any present or former
director, officer, employee, consultant, agent or manager
prior to closing on the Closing Date.
PAGE 20
6.1.18 VACATION PAY
Except as disclosed on Schedule 25, all vacation pay, bonuses,
commissions and other employee benefit payments payable to employees of the
Corporations are reflected and have been accrued in the books of account of the
Corporations.
6.1.19 EMPLOYEE BENEFIT PLANS
Schedule 3 hereto identifies each retirement, pension, bonus, share
purchase, profit sharing, stock option, deferred compensation, severance or
termination pay, insurance, medical, hospital, dental, vision care, drug, sick
leave, disability, salary continuation, legal benefits, unemployment benefits,
vacation, incentive or other compensation plan or arrangement or other employee
benefit that is administered, maintained or otherwise contributed to, or
required to be contributed to, by the Corporations for the benefit of employees
or former employees of the Corporations (the "Employee Plans") and, other than
in respect of employment insurance premiums and Canada Pension Plan
contributions, a true and complete copy of each Employee Plan has been furnished
to the Purchaser. Each Employee Plan has been maintained in compliance with its
terms and with the requirements prescribed by any and all statutes, orders,
rules and regulation that are applicable to such Employee Plan. All Employee
Plans that are retirement or pension plans are defined contribution plans and,
for greater certainty, none of the Employee Plans that is a retirement or
pension plan is a defined benefit plan. Except as described in Schedule 3
hereto:
(a) all contributions to, and payments from, each Employee Plan
that may have been required to be made in accordance with the
terms of any such Employee Plan, and, where applicable, the
laws of the jurisdictions that govern such Employee Plan, have
been made in a timely manner;
(b) all material reports, returns and similar documents (including
applications for approval of contributions) with respect to
any Employee Plan required to be filed with any governmental
agency or distributed to any Employee Plan participant have
been duly filed on a timely basis or distributed;
(c) there are no pending investigations by any governmental or
regulatory agency or authority involving or relating to an
Employee Plan, and, to the knowledge of the Vendors, no
threatened or pending claims (except for claims for benefits
payable in the normal operation or the Employee Plans), suits
or proceedings against any Employee Plan or asserting any
rights or claims to benefits under any Employee Plan that
could give rise to a liability nor, to the knowledge of the
Vendor and the Corporations, are there any facts that could
give rise to any liability in the event of such investigation,
claim, suit or proceeding;
PAGE 21
(d) no notice has been received by the Corporations of any
complaints or other proceedings of any kind involving the
Corporations or, to the Vendor's or the Corporations'
knowledge, any of the employees of the Corporations before any
pension board or committee relating to any Employee Plan or to
the Corporations;
(e) neither the Purchaser nor any of its affiliates (including the
Corporations) will incur any increased liability with respect
to any Employee Plan as a result of the transactions
contemplated by this Agreement; and
(f) the benefits enjoyed by the employees of the Corporations
prior to Closing are not greater than those disclosed in the
Employee Plans, and, except as disclosed in Schedule 25, the
full cost of the Employee Plans is reflected in the Financial
Statements.
6.1.20 BONDS, DEBENTURES, ETC.
Except as set forth in Schedule 6, the Corporations do not have
outstanding any bonds, debentures or mortgages, and the Corporations are not
under any agreement or obligation to create or issue any bonds, debentures or
mortgages.
6.1.21 LEASES
The Corporations are not a party to any lease or agreement in the
nature of a lease, whether as lessor or lessee, except leases (the "Water Cooler
Leases") granted by the Corporations, as lessor, to its customers for water
coolers, and those leases set forth and described in Schedule 8, in which is
specified the parties to each of the leases, their dates of commencement and
expiry dates, any options to renew, the locations and descriptions of any leased
lands and premises (if applicable) and the rental payable thereunder, each of
which lease is in good standing and in full force and effect without amendment
thereto. The Corporations, or, to the best of their knowledge, any other party
thereto are not in breach of any of the material covenants, conditions or
agreements contained in any such lease.
With respect to the Water Agreements and the real property leases
described in Schedule 8 ("Real Property Leases") in which the Corporations are
the tenant, except as specifically disclosed in Schedule 8:
(a) the Corporations are in possession of the premises demised to
it under each of the Real Property Leases;
(b) there have been no amendments, changes or modifications of any
of the Real Property Leases or Water Agreements, other than as
described in Schedule 8 or Schedule 19, respectively, and
there are no agreements
PAGE 22
outside the Water Agreements or Real Property Leases between
the Corporations and the landlords under the Real Property
Leases with respect to such tenancies;
(c) the Corporations are not in default under any of the Water
Agreements or Real Property Leases;
(d) to the knowledge of the Vendor and the Corporations, none of
the landlords under the Real Property Leases is in default
under the Real Property Leases;
(e) the Corporations have not delivered any notice or complaint to
any of the landlords under the Real Property Leases that the
landlord is in default thereunder;
(f) there are no existing disputes between any of the landlords
under the Real Property Leases and the Corporations as tenant
thereunder and the Corporations have no existing claim,
defence, set-off or counterclaim against the landlords under
the Real Property Leases or otherwise;
(g) there are no unpaid or outstanding tenant inducements, tenant
allowances and no lease takeovers in connection with any of
the Real Property Leases and no future free rent or rent
abatement periods under any of such Leases;
(h) all rent, additional rent or royalties and other payments
payable by the Corporations as tenant under the Real Property
Leases has been paid to the end of the month prior to Closing
subject to adjustment in accordance with the Real Property
Leases;
(i) no landlords must consent to the completion of the
transactions contemplated by this Agreement with respect to
the Real Property Leases, and there are no consents or
approvals required in respect of the Water Agreements;
(j) the facilities for water, power and utilities presently
installed in or about the Leased Properties are adequate for
the Business, such facilities are in good and useable
condition, subject to normal wear and tear. Except as
disclosed in Schedule 8, no orders, requests, demands or other
communications have been received by the Vendor, or by anyone
on behalf of the Vendor from any governmental authority,
requiring any changes, modifications or alterations to the
Leased Properties and the facilities thereon; and
PAGE 23
(k) there is full ingress and egress for pedestrians and vehicles
to and from the Leased Properties and the public roads and
highways abutting or adjacent to the each of the Leased
Properties. Except as disclosed in Schedule 8, each of the
Leased Properties is serviced by storm and sanitary sewers,
water, hydro and telephone services, the Vendor not having
experienced any material difficulties with such services for
the past 2 years.
6.1.22 TITLE TO PROPERTY
The Corporations are the owners of all of their property with good and
marketable title thereto free and clear of any mortgage, lien, charge, security
interest, adverse claim or other encumbrance whatsoever, except as set forth in
Schedule 6. Except as set forth in Schedule 6, the Corporations are not a party
to any conditional sales contract, hire-purchase agreement, security agreement
or other title retention agreement.
6.1.23 REAL PROPERTY
With respect to the Real Property:
(a) the Corporations have good and marketable title in fee simple
to such Real Property free and clear of all encumbrances of
any kind whatsoever, including rights of way, restrictive
covenants and easements, other than those disclosed in
Schedule 5;
(b) the buildings (the "Buildings") on the Real Property have been
maintained and shall continue until the Closing to be
maintained, in good condition and repair, subject to normal
wear and tear, in the same manner as would a prudent owner;
(c) the facilities for water, power and utilities presently
installed in or about the Real Property are adequate for the
Business, such facilities are in good and useable condition,
subject to normal wear and tear. Except as disclosed in
Schedule 5, no orders, requests, demands or other
communications have been received by the Vendor, or by anyone
on behalf of the Vendor from any governmental authority,
requiring any changes, modifications or alterations to the
Real Property and the facilities thereon;
(d) except as disclosed in Schedule 5, the Buildings are
constructed and completed in accordance with all necessary
building permits and approvals issued by the appropriate
governmental authorities, no change has been made to the
Buildings which are not in compliance with all building
permits, building restrictions (including private deed
PAGE 24
restrictions, if any), laws, bylaws, requirements, regulations
or ordinances of any governmental authority, and the Buildings
are now and shall at the Closing Date be used and occupied in
compliance with all building permits, building restrictions
(including private deed restrictions, if any), laws, bylaws,
requirements, regulations or ordinances of any governmental
authority;
(e) there is full ingress and egress for pedestrians and vehicles
to and from the Real Property and the public roads and
highways abutting or adjacent to the Real Property. Except as
disclosed in Schedule 5, the Real Property is serviced by
storm and sanitary sewers, water, hydro and telephone
services, the Vendor not having experienced any material
difficulties with such services for the past 2 years;
(f) except as disclosed in Schedule 5, there is no outstanding
work order or other requirement relating to the Real Property
by any governmental, provincial or municipal authority,
department or agency which shall not have been completed by
the Closing Date;
(g) the Vendor has not received notice of any threatened or
pending condemnation or expropriation of any part of the Real
Property; and
(h) the Buildings forming part of the Real Property have never
been insulated with a urea-formaldehyde foam type of
insulation.
6.1.24 INSURANCE
The Corporations or its Affiliates maintain fire (with extended risk
and casualty coverage), general liability, product liability, use and occupancy
and other forms of insurance covering the Corporations' property and assets and
protecting the Business in amounts and against such losses and claims as are
generally maintained by a prudent owner of a similar business. Schedule 7 lists
all policies of such insurance currently maintained by each of the Corporations
or its Affiliates on the Corporations' assets and the Corporations' personnel
together with a brief description of each such policy, including the type of
policy, name of insurer, policy number, coverage limits, expiration dates,
annual premiums and any pending claims thereunder and true and complete copies
of the most recent inspection reports, if any, received from insurance
underwriters as to the condition or insurance value of the assets of the
Corporations. The Corporations are not in default with respect to any of the
provisions contained in any such insurance policy nor have any of them failed to
give any notice or present any claim under any such insurance policy in due and
timely fashion. To the knowledge of the Vendor, there are no circumstances which
would or might entitle the Corporations to make a claim under any of such
insurance policies or which would or might be required under any of such
policies to be notified to the insurers and no material claim under any such
policy has been made by the Corporations since the
PAGE 25
latest Financial Year End. The Vendor has no knowledge of any circumstances or
occurrences which might form the basis of a material increase in premiums for
the current insurance coverage maintained by the Corporations.
6.1.25 MATERIAL CONTRACTS
The Corporations do not have outstanding any material agreement,
contract or commitment, written or oral, of any nature or kind whatsoever,
except:
(a) service contracts on office equipment;
(b) employment, service, union, labour, collective agreement,
pension, deferred profit sharing and other similar agreements
described in Schedule 3;
(c) bonds, debentures and mortgages described in Schedule 6;
(d) leases described in Schedule 8;
(e) insurance policies described in Schedule 7;
(f) conditional sales contracts and title retention agreements
described in Schedule 6;
(g) software licenses described in Schedule 13; and
(h) contracts and agreements described in Schedule 9;
and except as specifically noted on any of such schedules, no consents are
required from the parties to such contracts, agreements, engagements or
commitments to the change in control of the Corporations contemplated hereby or
for any other reason. The Corporations have delivered or made available to the
Purchaser a true and complete copy of each written material contract, which
copies accurately reflect the understanding of the Corporations with respect to
such contracts. The Corporations have delivered or made available to the
Purchaser a fair and accurate written summary of each oral material contract.
The execution of this Agreement and the consummation contemplated hereby shall
not violate any provision of any such material contracts and shall not result in
or create a right of termination, cancellation, or adverse modification of any
such material contracts. Except as disclosed in Schedule 25, the Corporations
have not delivered any products under any terms which provide for retrospective
customer price renegotiation and the Corporations have no liability whatsoever
to provide refunds of selling prices to any Customers with respect to any
products sold or delivered by the Corporations prior to Closing.
PAGE 26
6.1.26 OBLIGATIONS TO CUSTOMERS AND SUPPLIERS
Except as described in Schedule 9 hereto, there are no outstanding
warranties, repair contracts or other maintenance obligations with or to
customers of the Corporations or to any other users of the products of the
Corporations. The Corporations are not required to provide any bonding or other
financial security arrangements in connection with any transactions with any of
its customers or suppliers in the Ordinary Course of the Business. The standard
term water cooler rental agreements used by the Corporations are attached as
Schedule 9.
6.1.27 NO DEFAULT UNDER AGREEMENTS
Except as set out in Schedule 25 hereto, the Corporations are not in
default under or in breach of any material contract, agreement (written or
oral), indenture, loan agreements, security agreements or other instrument to
which any of them are a party or by which any of them are bound and there exists
no set of facts which, after notice or lapse of time or both, would constitute
such a default or breach, and each of such contracts, agreements, indentures or
other instruments is now in good standing and in full force and effect without
amendment thereto and the Corporations are entitled to all rights and benefits
thereunder.
6.1.28 NON-ARM'S LENGTH CONTRACTS
Except as disclosed in Schedule 10 hereto, the Corporations are not a
party to any material contract, agreement or arrangement with any officer,
director or employee of the Corporations or any of their Affiliates or any
Affiliate.
6.1.29 NO LOANS TO DIRECTORS, ETC.
Except as disclosed in the Financial Statements and in Schedule 17
hereto, the Corporations do not have any loan or other indebtedness outstanding
(other than the normal salaries, bonuses, fringe benefits and the obligation to
reimburse for expenses incurred on behalf of the Corporations in the normal
course of employment) which has been made or incurred to any director, officer,
shareholder or employee, to any former director, officer, shareholder or
employee of the Corporations or to any person with which it or any of the
foregoing do not deal at arm's length within the meaning of the ITA or IRC). The
aggregate amount of salaries, pension, bonuses, rents, management fees or other
remuneration of any nature paid or payable by the Corporations to the Vendor or
Affiliates (other than among the Corporations) during the calendar year ending
2000 amounted to not more than $10,000 and since that date and until the Closing
Date, payments to them and each of them have been and will be at no greater
rates.
PAGE 27
6.1.30 LITIGATION
There are no actions, suits, arbitration proceedings or other
proceedings (whether or not purportedly on behalf of the Corporations) which
have been commenced against the Corporations, pending or, to the Vendor's
knowledge, threatened against or affecting the Corporations, at law or in equity
or before or by any federal, provincial, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, or by or before any arbitrator except as described in Schedule 11
hereto, provided, however, the Vendor shall prosecute and defend such litigation
as set out in Schedule 11 at its own cost and expense and shall indemnify the
Purchaser against any liability from such litigation, and the Purchaser will
cooperate at the expense of the Vendor with the Vendor in the conduct of such
litigation. The Vendor is not aware of any existing grounds on which any action,
suit or proceeding might be commenced with any reasonable likelihood of success;
and, except as disclosed in the said Schedule 11, there is not currently
outstanding against any of the Corporations any judgment, decree, injunction,
ruling, order or award of any court, governmental department, commission, board,
bureau, agency, instrumentality, domestic or foreign, or arbitrator. Without in
any way limiting the generality of the foregoing, and except as disclosed in
Schedule 11, no product liability claims have been asserted or made, or continue
to be outstanding against any of the Corporations concerning the products
manufactured, bottled, distributed or sold by the Corporations (the "Products")
which is not fully covered by insurance. The Vendor agrees to bear all of the
uninsured liability, costs and expense (including, without limitation, legal
fees on a solicitor - client basis) for any such claim relating to Products
bottled or canned prior to and including the Closing Date.
6.1.31 BANKING INFORMATION
Schedule 12 is a true and complete list showing:
(a) the name and location of each bank, trust company or similar
institution in which the Corporations have an account or
safety deposit box and the names of all persons authorized to
draw thereon or to have access thereto; and
(b) the name of each Person holding a general or special power of
attorney from the Corporations and a summary of the terms
thereof.
6.1.32 TAX AND GOVERNMENT RETURNS
Except as disclosed in Schedule 25, each of the Corporations has duly
filed in a timely manner all tax returns required to be filed by it (including
any and all tax elections selected by the Corporations in relation to such tax
returns) and all information returns as to which the non-filing or late filing
could result in interest or
PAGE 28
penalties, has made complete and accurate disclosure in such returns and has
paid all taxes shown on such returns as being due and payable and has also paid
all assessments and reassessments and all other taxes, governmental charges,
penalties, interest and fines due and payable by the Corporations up to the date
hereof. The Corporations have made adequate provision in the Financial
Statements for the taxes which are payable during the current fiscal period for
which tax returns are not yet required to be filed. There are no agreements,
waivers or other arrangements providing for an extension of time with respect to
the assessment or reassessment of income tax or the filing of any tax return by,
or payment of any tax by, or levying of any governmental charge against, the
Corporations. Except as set out on Schedule 11, there are no actions, audits,
assessments, reassessments, suits, proceedings, investigations or claims now
threatened or pending against the Corporations in respect of taxes or
governmental charges or any matters under discussion with any governmental
authority relating to taxes or governmental charges asserted by any such
authority. The Corporations have withheld from each payment made by them the
amount of all taxes and other deductions required to be withheld therefrom and
have paid the same to the proper taxing or other authority within the time
prescribed under any applicable legislation or regulation. The Corporations have
remitted to the proper taxing or other authority, all sales tax, goods and
services tax and similar tax collected by them within the time prescribed under
any applicable legislation or regulation. For greater certainty, the Vendor
shall be responsible to prepare and file the year end income tax return arising
from this transaction and agrees that all taxes arising therefrom and the cost
of preparing such returns shall be included as Assumed Liabilities for the
purpose of this Agreement. The Vendor agrees to indemnify the Purchaser and the
Corporations from and against all liabilities, including taxes, penalties and
interest, arising from the late filing of tax returns for any of the
Corporations filed for the tax periods prior to the Closing Date and the year
end income tax return arising from this transaction.
6.1.33 ACCOUNTS RECEIVABLE
At Closing, the Accounts Receivable, net of reasonable allowance for
doubtful accounts, recorded on the books of the Corporations arose in the
Ordinary Course of the Business, are bona fide and good in all material respects
without, to the Vendor's knowledge, any right of set-off or counterclaim by the
Customer of the Corporations.
6.1.34 COMPLIANCE WITH APPLICABLE LAWS, ETC.
The Corporations have conducted and are conducting the Business in
compliance in all material respects with all applicable laws, rules and
regulations of each jurisdiction in which the Business is carried on and are not
in material breach of any such laws, rules or regulations, and is duly licensed,
registered or qualified in each jurisdiction in which the Corporations own or
lease their assets or carries on the Business, to enable the Business to be
carried on as now conducted and its property and assets to be owned, leased and
operated, and all such licenses, registrations and
PAGE 29
qualifications are valid and subsisting and in good standing and none of the
same contains any burdensome term, provision, condition or limitation which has
or may have a material adverse effect on the operation of the Business.
6.1.35 ENVIRONMENTAL MATTERS
(a) The Real Property, Leased Property and all property occupied
or used (or formerly occupied or used) by the Corporations or
the Business and their existing and prior uses (since
commencement of ownership or occupancy by the Corporations of
such property) comply and have at all times during the
ownership or occupancy of such property by the Corporations
complied with, and the Corporations are not in violation of,
and have not violated, in connection with the ownership, use,
maintenance or operation of its assets, including the Real
Property and Leased Property, and the conduct of the Business,
any applicable Environmental Laws, except as disclosed in
Schedule 24.
(b) Without limiting the generality of paragraph 6.1.35(a) above,
the Corporations have operated their Real Property and Leased
Property used by them or in its Business and have at all times
received, handled, used, stored, treated, shipped and disposed
of all Hazardous Materials or toxic materials, substances,
pollutants, contaminants or wastes in the conduct of its
Business, in strict compliance with all applicable
Environmental Laws.
(c) The Corporations have not received from any governmental
authority notice of any orders, directions or instructions
relating to environmental matters requiring any work, repairs,
construction or capital expenditures with respect to the
assets of the Corporations or the conduct of the Business.
(d) No Hazardous Materials or toxic materials, substances,
pollutants, contaminants or wastes have been released by any
of the Corporations into the environment, or deposited,
discharged, stored, placed or disposed of at, on, near or
under the Real Property or Leased Property, nor has any such
property been used by the Corporations as a landfill or waste
disposal site.
(e) Except as set forth in Schedule 24, no notices of any
violations, orders or instructions of any of the matters
referred to in paragraphs 6.1.35(a) through (d) relating to
the Business or the assets of the Corporations or their use
have been received by the Corporations or are expected to be
received.
PAGE 30
(f) There are no outstanding orders or charges against the
Corporations under any applicable health and safety
legislation in any territory in which the Business is
conducted.
(g) To the Vendor's knowledge, no part of the Corporations'
assets, businesses, facilities or properties is located within
an environmentally sensitive area, as determined by
legislation in any territory in which the Business is
conducted.
6.1.36 NO LIABILITIES, ETC.
Except as disclosed in Schedule 25, at Closing, there will be no
Liabilities of the Corporations of any kind whatsoever, contingent or otherwise,
in respect of which the Corporations or the Purchaser may be liable on or after
the completion of the transactions contemplated by this Agreement other than:
(a) Liabilities disclosed in the Financial Statements; or
(b) Liabilities or obligations arising since the date of the most
recent Financial Statements which were:
(i) in the Ordinary Course of Business and individually
do not exceed $50,000;
(ii) are in types and amounts consistent with the
Corporations' past practical experience; and
(iii) are included in the Net Liquid Assets Statement;
Except as disclosed in Schedule 10 and Schedule 25 with regard to
accrued vacation and unearned revenue for dispenser rentals, all expenses
associated with the Business are paid by the Corporations and properly reflected
in the Financial Statements.
6.1.37 CONDITION AND SUFFICIENCY OF THE ASSETS OF THE
CORPORATIONS
All facilities, machinery and equipment owned or used by the
Corporations in connection with the Business are set out in Schedule 15 hereto
and all such assets are in good operating condition and in a state of good
repair and maintenance, reasonable wear and tear excepted, except as set forth
in Schedule 15 hereto. The assets of the Corporations at Closing are sufficient
to carry on the Business in the same manner following Closing as was carried on
by the Corporations prior to Closing and include, without restriction, all of
the assets used in the Business including, but not limited to, Inventory, all
fixed assets including water coolers, parts, 3 and 5-gallon bottles, land,
buildings, leasehold improvements, signs, manufacturing equipment, bottle racks,
pallets, crates, laboratory equipment, forklifts, water tanks, delivery and
other
PAGE 31
vehicles, bottling equipment, computers, office furniture and other equipment,
trademarks and business names, water rights, goodwill and all other tangible and
intangible assets used in the Business.
6.1.38 INTELLECTUAL/INDUSTRIAL PROPERTY RIGHTS
(a) Part A of Schedule 13 sets forth a complete description of all
trademarks, trade names (including logos), service marks and
brand names and all applications therefor; and Part B of
Schedule 13 sets forth a complete description of all patents
(including divisions, reissues, renewals and extensions),
copyrights, industrial designs and other intellectual and
industrial property rights, including computer software, and
all applications therefor; in each case whether or not
registered, both domestic and foreign, used in whole or in
part in or required for the proper carrying on of the Business
(such schedules showing, for each, the registration or
application number, country, filing and expiration dates (if
any), and classes; and for any unregistered trade-marks,
service marks or brand names not under application for
registration, the products with respect to, and countries in
which they are used). All of such trade-marks, trade names,
service marks, copyrights, patents, industrial designs and
other intellectual and industrial property rights are owned by
or validly licensed to the Corporations, the Corporations have
the sole and exclusive right to use the same, such are in good
standing, all registrations and filings necessary to preserve
the rights of the Corporations have been made and are in good
standing, and no royalty payments, license fees or other
charges are payable in respect thereof. For greater certainty,
none of the Corporations has any right, title or interest to
the name "AquaSource" and the Purchaser acknowledges that it
shall not acquire any right, title or interest to the name
"AquaSource" in connection with the transactions contemplated
herein.
(b) To the best of the Vendor's knowledge:
(i) the conduct of the Business by the Corporations does
not infringe upon the patents, industrial designs,
trade-marks, trade names, brand names, service marks,
logos or copyrights, whether or not registered and
whether domestic or foreign, or the trade secrets,
know-how or confidential or proprietary information
of any other Person;
(ii) no person is licensed to use any trade-marks, trade
names or copyright of the Corporations except as
disclosed in Schedule 13 nor is any person infringing
on the intellectual property of the Corporations.
PAGE 32
(c) The Corporations own, or have valid rights to use, such
computer software as is necessary for the conduct of the
Business as currently being conducted. All computer software
owned by the Corporations and any licenses granted in respect
thereof are set out on Part C of Schedule 13, and the computer
software licensed for use by the Corporations and all fees
payable in respect thereof are set out on Part D of Schedule
13. Except as set forth in Schedule 13, the completion of the
transactions contemplated by this Agreement will not afford
any of the parties to any such license (other than the
Corporations) the right to terminate any such license nor will
such transactions impose any more onerous obligations on the
Corporations under such licenses than obtain at present;
(d) None of the Corporations nor the Vendor has licensed or
permitted any other person or entity to use or exploit any of
the Corporations' intellectual property by any member of the
public. Neither the Corporations nor the Vendor has licensed
or permitted any other person or entity to use or exploit any
of the Corporations' intellectual property nor have the
Corporations or the Vendor, to their knowledge, suffered any
such exploitation to exist. The Vendor does not know of any
material defect in the intellectual property (such as the
abandonment of a trademark) or a defect which could give rise
to the cancellation of a trademark registration.
6.1.39 COMMITMENTS FOR PURCHASES OR SALES AT LOSSES
To the Vendor's Knowledge, the Corporations do not have any commitments
or agreements for sales of products or other assets at prices involving
prospective losses that cannot be terminated on six (6) months notice or less.
6.1.40 SIGNIFICANT CUSTOMERS
The Business of any of the Corporations is not dependent for more than
five percent (5%) of its gross revenues on any single customer, except as
disclosed in Schedule 18.
6.1.41 VALIDITY OF AGREEMENT
(a) The entering into of this Agreement and the consummation of
the transactions contemplated hereby will not result in the
violation of any of the terms and provisions of the constating
documents or articles of incorporation or continuance or
bylaws of the Corporations or of any indenture or other
agreement, written or oral, to which the Corporations or the
Vendor may be a party;
PAGE 33
(b) The entering into of this Agreement and the consummation of
the transactions contemplated hereby will not result in the
violation of any law or regulation or any applicable order of
any court, arbitrator or governmental authority having
jurisdiction over the Corporations or the Vendor or their
respective properties or businesses; and
(c) Except as specifically referred to in this Agreement, no
licenses necessary to the carrying on of the Business require
consents or approvals to the change in the shareholdings of
the Corporations as a result of the entering into of this
Agreement or the consummation of the transactions contemplated
hereby.
6.1.42 PAID UP CAPITAL
The paid up capital of the Purchased Shares for the purposes of the ITA
or IRC as at December 31, 2000 will be certified by the chief financial officer
of the Vendor in a certificate to be delivered to the Purchaser at the Closing.
6.1.43 DISCLOSURE
The representations and warranties of the Corporations and the Vendor
included in this Agreement are true and correct and do not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements contained in such representations and warranties not misleading
to a prospective purchaser of the Purchased Shares. The Vendor represents that
immediately prior to Closing, it shall make due inquiry of the production,
financial and marketing personnel involved in the Business of the Corporations
as well as due inquiry of the Corporations' professional advisors to ensure that
such inquiries do not suggest any facts or lead to any information that make any
of the representations and warranties contained herein untrue or misleading.
6.1.44 SUBSIDIARIES
The Corporations have no subsidiaries, except as expressly disclosed
herein. The Corporations are not party to any agreements of any nature to
acquire any subsidiary or to acquire or lease any other business operation. The
Corporations shall not prior to the Time of Closing acquire, or agree to
acquire, any subsidiary or business without the prior written consent of the
Purchaser.
6.1.45 WATER SOURCE
The quality and purity of the water sources (the "Water Sources") used
by the Corporations in connection with their Business including, without
restriction, pursuant to the Water Agreements, is in accordance with all
legislation by the applicable governmental authority, and comply with the
regulations established by the
PAGE 34
International Bottled Water Association. The volume of water produced from all
Water Sources is sufficient to carry on the Business of the Corporations
following Closing in a manner consistent with the Business as carried on prior
to Closing. The Vendor does not have any information concerning, or knowledge
of, any problem with respect to any of the Water Sources whatsoever except as
disclosed in Schedule 25. Except as set forth in Schedules 6 and 9, the sale
contemplated herein shall not result in termination of the Water Agreement or of
any agreement with respect to any of the Water Sources nor is any consent
required from a third party in respect thereof. The Corporations and any third
parties from whom the Corporations obtain water have all necessary licenses to
allow the Corporations to carry on their Business at Closing, except as
disclosed in Schedule 25.
6.1.46 CONFIDENTIALITY
The Corporations are not party to any written or oral non-competition
or confidentiality agreement, whether or not legally binding, other than
Confidentiality Agreements in favour of the Corporations, except as disclosed in
Schedule 25.
6.1.47 INCORPORATION OF VENDOR/OWNERSHIP OF PURCHASED SHARES
The Vendor is a corporation duly incorporated and validly existing in
good standing under the laws of the State of Delaware. The Vendor is the
beneficial and legal owner of the Purchased Shares. The Purchased Shares are
free of all liens, charges, security interests, adverse claims, pledges and
other encumbrances whatsoever except as set out in Schedule 6. No person, firm
or corporation (other than the Purchaser under this Agreement) has any agreement
or option or any right capable of becoming an agreement or option for the
purchase of any of the Purchased Shares.
6.1.48 ENFORCEABILITY OF OBLIGATIONS
This Agreement constitutes a valid and binding obligation of the Vendor
enforceable against it in accordance with the terms hereof, subject however, to
limitations with respect to enforcement imposed by law in connection with
bankruptcy or similar proceedings and to the extent that equitable remedies such
as specific performance and injunction are in the discretion of the court from
which they are sought.
6.1.49 ABSENCE OF CONFLICTING AGREEMENTS
The Vendor is not party to, bound or affected by or subject to any
indenture, mortgage, lease, agreement, instrument, charter or by-law provision,
order, judgment or decree which would be violated, contravened or breached by
the execution and delivery by the Vendor of this Agreement or the performance by
the Vendor of any of the terms hereof or thereof.
PAGE 35
6.1.50 COOLERS AND CUSTOMERS
At Closing, the Corporations shall have no less than 38,500 Water
Cooler Rental Customers and 5,000 Water Only Customers. For greater certainty,
the definition of Water Cooler Rental Customers shall be determined by counting
every cooler as a Customer for the purposes of this calculation, whereas the
number of Water Only Customers shall be determined in reference to the number of
delivery points regardless of the number of coolers at each delivery point which
may be supplied with water.
6.1.51 ARRANGEMENT WITH PROFESSIONALS
Any arrangements of the Corporations with attorneys, accountants or
other professional advisors can be terminated by the Corporations at or after
Closing without penalty or payment by the Corporations except with respect to
unbilled services rendered prior to the date of such termination which fees
shall not exceed $10,000 in the aggregate.
6.1.52 CUSTOMER RELATIONS
Except as disclosed in Schedule 25, during the past 12 months, no
Customer of the Corporations has terminated or communicated to the Corporations
the intention or threat to terminate its relationship with the Corporations, or
the intention to substantially reduce the quantity of products or services it
purchases from the Corporations, because of dissatisfaction with the products or
services sold by the Corporations, where such actions of such Customer would
result in a reduction of $10,000 of revenue per annum to any of the
Corporations.
6.1.53 COUPONS
The number of free trials, discounted rentals and coupons (collectively
the "Coupons") sold or distributed by the Corporations will as at the Closing
have been in the Ordinary Course of Business for the 120 days prior to Closing
and, for greater certainty, the Corporations will not have sold or distributed
more than $50,000 worth of Coupons during such 120 day period.
6.1.54 EXPORT MARKET
Except as disclosed in the distribution agreements listed in Schedule
9, the Corporations do not export, distribute or sell water or other products in
territories outside the province of British Columbia and the States of
Washington and Idaho.
PAGE 36
ARTICLE 7. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
7.1 The Purchaser hereby represents and warrants to the Vendor as
follows and acknowledges that the Vendor is relying on such representations and
warranties in connection with the transactions contemplated by this Agreement:
7.1.1 INCORPORATION, ORGANIZATION AND AUTHORITY OF
PURCHASER
The Purchaser is a corporation duly amalgamated and subsisting under
the laws of Nova Scotia, and has the necessary corporate power, authority and
capacity to carry out its obligations hereunder.
7.1.2 DUE AUTHORIZATION OF AGREEMENT BY THE PURCHASER
The execution and delivery of this Agreement and the consummation of
the transactions herein contemplated have been duly authorized by all necessary
corporate action on behalf of the Purchaser and this Agreement has been duly
executed and delivered by the Purchaser and is a valid and binding obligation of
the Purchaser enforceable against it in accordance with the terms hereof,
subject however, to limitations with respect to enforcement imposed by law in
connection with bankruptcy or similar proceedings to the extent that equitable
remedies such as specific performance and injunction are in the discretion of
the court from which they are sought.
7.1.3 ABSENCE OF CONFLICTING AGREEMENTS
The Purchaser is not a party to, bound or affected by or subject to any
indenture, mortgage, lease, agreement, instrument, charter or by-law provision,
order, judgment or decree which would be violated, contravened or breached by
the execution and delivery by it of this Agreement or the performance by it of
any of the terms hereof or thereof.
7.1.4 LITIGATION
There is no suit, action, litigation, arbitration proceeding, including
appeals and applications for review, in progress, pending or threatened against
or relating to the Purchaser or any judgment, decree, injunction, rule or order
of any court, governmental department, commission, agency, instrumentality or
arbitrator currently outstanding against the Purchaser which, in any such case,
might adversely affect the ability of the Purchaser to enter into this Agreement
or to consummate the transactions contemplated hereby and the Purchaser is not
aware of any existing ground on which any such action, suit or proceeding may be
commenced with any reasonable likelihood of success.
PAGE 37
ARTICLE 8. SURVIVAL OF REPRESENTATIONS AND WARRANTIES
8.1 CERTIFICATE OF A PARTY
All statements contained in any certificate or other instrument
delivered by or on behalf of any party pursuant or in connection with the
transactions contemplated by this Agreement shall be deemed to be made by such
party hereunder.
8.2 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE
VENDOR
All representations, warranties and covenants of the Vendor contained
in this Agreement or contained in any agreement, certificate or other document
delivered or given pursuant to this Agreement shall survive the Closing and,
notwithstanding such Closing or any investigation made by or on behalf of the
Purchaser with respect thereof, shall continue in full force and effect for the
benefit of the Purchaser:
(a) in respect of matters other than tax matters, environmental
matters, product liability matters and matters relating to
title to the Purchased Shares, for a period of two years from
the Closing Date;
(b) in respect of tax matters, unless resulting from any
misrepresentation made or fraud committed in filing a return
or supplying information for the purposes of the ITA or IRC,
the Income Tax Act (British Columbia), or any other
legislation imposing tax on the Corporations for the period
commencing on the Closing Date and ending on the date on which
the last applicable limitation period under applicable income
tax or other tax laws expires with respect to any taxation
year which is relevant in determining any liability under this
Agreement with respect to tax matters; and
(c) in respect of environmental matters, for the period commencing
on the Closing Date and ending on the day on which the last
applicable limitation period under applicable laws expires;
and
(d) there shall be no limit on the representations and warranties
relating to product liability and to title of the Vendor to
the Purchased Shares or relating to any tax liability of the
Corporations based on misrepresentations or fraud committed in
filing a return or supplying information for purposes of any
laws imposing tax on the Corporations;
and any claim in respect thereof (except a claim based on fraud) shall be made
within such periods in accordance with the provisions set out herein and upon
the expiry of
PAGE 38
such periods, the Vendor shall have no further liability to the Purchaser
hereunder with respect to any such representations or warranties.
8.3 SURVIVAL OF REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The representations and warranties of the Purchaser contained in this
Agreement or in any agreement, certificate or other document delivered or given
pursuant to this Agreement shall survive the Closing and, notwithstanding such
Closing or any investigation made by or on behalf of the Vendor shall continue
in full force and effect for the benefit of the Vendor for a period of two years
from the Closing Date and any claim in respect thereof shall be made within such
period and upon the expiry of such period the Purchaser shall have no further
liability to the Vendor with respect to any such representations or warranties;
provided, however, that the Purchaser shall remain liable to the Vendor for all
claims in respect of environmental matters and relating to product liability or
employment matters (other than those matters which are included in the Net
Liquid Assets Statement) for the period commencing on the Closing Date and
ending on the day on which the last applicable limitation period under
applicable law expires.
ARTICLE 9. CONDITIONS PRECEDENT
9.1 The Purchaser's obligations under this Agreement are conditional
upon the performance of or compliance with the following conditions prior to or
at Closing, each of which may be waived in writing by the Purchaser in whole or
in part:
(a) The representations and warranties of the Vendor contained in
this Agreement shall be true and correct in all material
respects as of the Closing except for such changes as may
arise in the Ordinary Course of Business and the Vendor shall
deliver an Officers' Certificate at Closing in the form
attached as Schedule 21;
(b) All of the terms, covenants and agreements set forth in this
Agreement to be complied with or performed by the Vendor on or
before the Closing Date have been complied with or performed
by the Vendor in all material respects on or before the
Closing Date;
(c) The Purchaser and its representatives shall have reasonable
access to the Corporations' accounting records, financial
records, deeds and other title documents, and to the physical
assets, and the Vendor shall furnish the Purchaser or its
representatives with all information which the Purchaser may
reasonably require with regard to the assets and operation of
the Corporations;
PAGE 39
(d) From the date hereof to the Time of Closing, there shall have
been no substantial loss to or destruction of the assets of
the Corporations not fully covered by insurance;
(e) No action or proceeding shall be pending or threatened by any
person to restrain or prohibit:
(i) the transfer of the Purchased Shares to the
Purchaser;
(ii) the Corporations from conducting their operations or
carrying on the Business after Closing;
(f) No legislation (whether by statute, by-law, regulation or
otherwise) shall have been enacted or introduced which, in the
opinion of the Purchaser, acting reasonably, materially
adversely affects or could reasonably be expected to
materially adversely affect the operation and Business of the
Corporations;
(g) The Purchaser shall have received all governmental approvals
required to complete the transactions contemplated hereby;
(h) All consents in respect of all Real Property Leases, including
the Kent lease, and other Material Contracts in Schedule 9
will have been received which will permit the transactions
contemplated herein to occur without penalty, additional
payments or concessions;
(i) The Vendor shall deliver to the Purchaser and the Purchaser's
Solicitors at the Time of Closing a favourable opinion of the
Vendor's Solicitors in a form substantially similar to that
annexed as Schedule 22; and
(j) The Board of Directors of the Purchaser has approved this
transaction which approval shall have been deemed to have
occurred unless notice to the contrary is given to the Vendor
on or before May 8, 2001.
9.2 The Vendor's obligations under this Agreement are conditional upon
the performance of or compliance with the following conditions, each of which
may be waived by the Vendor in whole or in part:
(a) The representations and warranties of the Purchaser contained
in this Agreement shall be true and correct in all material
respects as of the Closing and the Purchaser shall deliver an
Officers' Certificate at Closing in the form attached as
Schedule 21;
(b) All of the terms, covenants and agreements set forth in this
Agreement to be complied with or performed by the Purchaser in
all material
PAGE 40
respects on or before the Closing Date have been complied with
or performed by the Purchaser on or before the Closing Date;
(c) The Vendor shall at the time of Closing be released as a
guarantor of the lease dated July 8, 1999, pursuant to which
Pure Water Corporation occupies the premises located at 00000
00xx Xxxxxx Xxxxx, Xxxx, Xxxxxxxxxx 00000; and
(d) No action or proceeding shall be pending or threatened by any
person to restrain or prohibit:
(i) the transfer of the Purchased Shares to the
Purchaser; or
(ii) the Corporations from conducting their operations or
carrying on the Business after Closing
(e) The Board of Directors of the Vendor shall have approved this
transaction provided that such approval shall be deemed to
have been received unless notice to the contrary is given to
the Purchaser on or before May 16, 2001.
9.2.1 WAIVER OF CONDITION AND CLAIM FOR DAMAGES
Notwithstanding anything else contained in this Agreement:
(a) if the performance of the covenants, agreements or
representations and warranties to be carried out or performed
by the Vendor do not depend upon the performance of a third
party over which the Vendor does not have any reasonable
control, the Purchaser may in addition to any other remedy it
has, waive such covenant, agreement, representation or
warranty as a condition precedent to the closing of the
transaction contemplated by this Agreement and claim against
the Vendor for any damages suffered by the Purchaser as a
result of a failure by the Vendor to perform and satisfy such
covenant, agreement, representation or warranty; and
(b) if the performance of the covenants, agreements or
representations and warranties to be carried out or performed
by the Purchaser do not depend upon the performance of a third
party over which the Purchaser does not have any reasonable
control, the Vendor may in addition to any other remedy they
have, waive such covenant, agreement, representation or
warranty as a condition precedent to the closing of the
transaction contemplated by this Agreement and claim against
the Purchaser for any damages suffered by the Vendor as a
result of a failure by the Purchaser
PAGE 41
to perform and satisfy such covenant, agreement,
representation or warranty.
ARTICLE 10. CLOSING ARRANGEMENTS
10.1 TIME AND PLACE OF CLOSING
The completion of the transactions contemplated by this Agreement shall
take place at the Time of Closing on the Closing Date at the offices of the
Vendor's Solicitors in Seattle, Washington, or at such other place as may be
agreed upon between the parties hereto.
10.2 CLOSING ARRANGEMENTS
At the Time of Closing, upon fulfillment of all the conditions hereof
which have not been waived in writing by the Purchaser or the Vendor
respectively:
10.2.1 PURCHASE AND SALE OF PURCHASED SHARES
The Vendor shall sell and the Purchaser shall purchase the Purchased
Shares.
10.2.2 DELIVERY OF SHARE CERTIFICATES
The Vendor (in accordance with respective obligations as herein set
forth) shall deliver or cause to be delivered to the Purchaser certificates
representing the Purchased Shares duly endorsed in blank for transfer or
accompanied by an instrument of stock transfer.
10.2.3 VENDOR'S COVENANTS
The Vendor covenants that it shall deliver to the Purchaser at the Time
of Closing, duly executed by properly authorized persons, as required, the
following:
(a) proof that Vendor has taken all corporate steps necessary or
in the opinion of the Purchaser's Solicitors desirable, to
authorize and effect the sale of the Purchased Shares;
(b) the resignations of such of the officers and directors of the
Corporations as the Purchaser may direct;
(c) the releases of any claims by the Vendor and related parties
against the Corporations in a form satisfactory to the
Purchaser's Solicitors; and
(d) a statutory declaration in the form set out in Schedule 21
hereto duly sworn by the Vendor.
PAGE 42
10.2.4 PAYMENT OF PURCHASE PRICE
On the fulfillment of the foregoing terms of this Article 10 and
subject to all the other terms and conditions contained in this Agreement being
complied with and contemporaneously with the transfer of the Purchased Shares
into the name of the Purchaser and/or its nominees being duly and validly
recorded on the books of the Corporations, the Purchaser shall pay and satisfy
the Purchase Price by the payment of the amounts specified in Article 4 in the
manner provided in paragraph 4.2.
10.2.5 TAX AMOUNTS WITHHELD
The Vendor and Purchaser acknowledge and agree that it is impractical
for the Vendor to obtain and deliver to the Purchaser on or before the Closing
Date a certificate issued by Canada Customs and Revenue Agency under Section 116
of the ITA (the "Section 116 Certificate") with the Certificate limit equal to
or greater than that portion of the Purchase Price allocated to Polaris and
Stellen less the portion thereof allocated to the non-competition covenant set
forth in Article 13. As a consequence, the Vendor and Purchaser agree that the
Purchaser shall withhold from the Purchase Price payable to the Vendor the
amount required to be withheld under the ITA with regard to the Purchase Price,
as adjusted, allocated in paragraph 4.1(b) to Polaris Water Company, Inc. and
Stellen Investments Ltd. (such amount being the "Escrow Amount") and shall
deposit the Escrow Amount with the Escrow Agent to be held and distributed in
accordance with the Escrow Agreement. The Vendor shall use its commercially
reasonable efforts to obtain a Section 116 Certificate as soon as possible after
the Closing Date. Upon delivery of the Section 116 Certificate to the Purchaser,
satisfactory in form and substance to the Purchaser acting reasonably, the
Purchaser shall immediately notify the Escrow Agent of the Purchaser's
satisfaction of the form and substance of such Certificate and deliver a
certified copy of such Certificate to the Escrow Agent, following which the
Escrow Agent shall forthwith pay the Escrow Amount to the Vendor or otherwise,
all in accordance with the terms of the Escrow Agreement.
ARTICLE 11. INDEMNIFICATION
11.1 INDEMNIFICATION BY VENDOR
Subject to paragraphs 11.3, 11.4 and 11.5 below, if the transactions
contemplated by this Agreement are consummated, the Vendor hereby agrees to
indemnify and hold the Purchaser harmless against and in respect of any loss,
damage, claim, action, suit, proceeding, deficiency or expense, including any
and all out of pocket costs, including, without limitation, all its legal fees
and disbursements on a solicitor and own client basis (collectively the
"Losses"), arising from (i) any misrepresentation or breach of any warranty,
agreement, covenant or obligation of the Vendor contained in this Agreement or
(ii) the conduct of the Business by the Corporations and all Liabilities arising
in respect thereof prior to and including the
PAGE 43
Time of Closing, including any Liabilities: (A) arising in respect of matters
disclosed in the Schedules other than Liabilities which are included in the Net
Liquid Assets Statement; (B) arising in respect of the obligations of the
Corporations associated with the Terminated Contracts; and (C) for costs or
expenses to terminate any Assumed Contract after the Closing that are in excess
(the "Excess Costs") of the costs and expenses set forth in Schedule 9.
11.2 INDEMNIFICATION BY PURCHASER
Subject to paragraphs 11.3, if the transactions contemplated by this
Agreement are consummated, the Purchaser hereby agrees to indemnify and hold the
Vendor harmless against and in respect of any Losses arising from (i) any
misrepresentation or breach of any warranty, agreement, covenant or obligation
of the Purchaser contained in this Agreement or (ii) the conduct of the Business
by the Corporations and all Liabilities arising in respect thereof or the
Purchaser after the Time of Closing, including the Liabilities in connection
with any Assumed Contract arising after Closing other than the Excess Costs
referred to in Paragraph 11.1.
11.3 DETAILS OF CLAIMS
With respect to any claim provided for under paragraphs 11.1 and 11.2,
no indemnity hereunder shall be sought unless written notice providing
reasonable details of the reasons for which the indemnity is sought is provided
to the Vendor or the Purchaser, as the case may be, and such notice is given by
the Purchaser or the Vendor, as the case may be, before the expiration of the
limitation dates provided in paragraphs 8.2 and 8.3 hereof; provided, further,
with respect to all claims for indemnification as to third party claims, the
party from whom indemnification is sought shall have the right to defend and
resolve such claims at its own expense and the indemnified party will cooperate
with the indemnifying party and will not unreasonably withhold its consent to
settlement of any claims.
11.4 THRESHOLD FOR LIABILITY OF VENDOR
Notwithstanding anything contained in this Article 11, the Vendor shall
be required to indemnify and hold harmless the Purchaser under this Article 11
only if the aggregate amount of such Losses suffered or incurred by the
Purchaser for all such matters exceeds $50,000. In the event such $50,000 amount
is exceeded, the Purchaser shall be entitled to indemnification with respect to
all Losses incurred provided that, for greater certainty, this paragraph 11.4
shall not apply to any Assumed Liabilities used in the Purchase Price adjustment
contemplated in paragraph 4.3 hereof;
PAGE 44
11.5 CAP ON VENDOR INDEMNIFICATION
Notwithstanding anything contained in this Article 11 to the contrary,
the Vendor shall not be required to indemnify and hold harmless the Purchaser
under this Article 11 for any Losses in excess of the Purchase Price, as
adjusted pursuant to Articles 4 and 5, for any and all Losses caused by breach
of representations and warranties other than breaches of representations and
warranties with respect to title to the Purchased Shares and Subsidiary Shares,
tax matters, environmental matters and product liability which shall be
unlimited.
ARTICLE 12 MISCELLANEOUS
12.1 BROKERAGE, COMMISSIONS, ETC.
It is understood and agreed that no broker, agent or other intermediary
has acted for the Vendor or the Purchaser in connection with the transactions
contemplated by this Agreement. The Vendor agrees to indemnify and save harmless
the Corporations and the Purchaser from and against any claims whatsoever for
any brokerage, commission or other remuneration payable or alleged to be payable
to any broker, agent or other intermediary who purports to act or have acted for
the Vendor. The Purchaser agrees to indemnify and save harmless the Vendor from
and against any claims whatsoever for any brokerage, commission or other
remuneration payable or alleged to be payable to any broker, agent or other
intermediary who purports to act or have acted for the Purchaser.
12.2 FURTHER ASSURANCES
Each of the parties hereto upon the request of the other party or
parties hereto, whether before or after the Time of Closing, shall do, execute,
acknowledge and deliver or cause to be done, executed, acknowledged or delivered
all such further acts, deeds, documents, assignments, transfers, conveyances,
powers of attorney and assurances as may be reasonably necessary to effect
complete consummation of the transactions contemplated by this Agreement.
12.3 NOTICES
Any notice, direction or other instrument required or permitted to be
given to any party hereunder shall be in writing and shall be sufficiently given
if delivered personally, or if sent by registered prepaid mail or if transmitted
by facsimile or other form of recorded communication tested prior to
transmission to such party:
PAGE 45
(a) in the case of a notice to the Vendor:
AquaSource Inc.
000 Xxxxxxxxx Xxxxxx Xxxxx, Xxxxx 000
Xxxx Xxxxxxxx, XX 00000
Attention: Xxxxx Xxxxxxx, Chief Executive Officer
--------------------------------------------------
Fax: (000) 000-0000
with a copy to:
Stoel Rives, LLP
000 Xxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxxxx 00000-0000
Attention: Xxxxx X. Tune
-------------------------
Fax: (000) 000-0000
(b) in the case of a notice to the Purchaser:
Sparkling Spring Water Group Limited
0000 Xxxx Xxxxx Xxxx
X.X. Xxx 0000
Xxxxxxx, XX 00000
Attention: Xxxxxx Xxxxxxxx, Chief Financial Officer
----------------------------------------------------
Fax: (000) 000-0000
with a copy to:
Xxxxxxx XxXxxxxx Stirling Scales
Barristers and Solicitors
900 - 0000 Xxxxx Xxxxx Xxxxxx
Xxxxxxx, Xxxx Xxxxxx X0X 0X0
Attention: Xx. Xxxxxxxx X. Xxxxxx
----------------------------------
Fax: (000) 000-0000
Any such notice, direction or other instrument, if delivered
personally, shall be deemed to have been given and received on the date on which
it was delivered at such address, provided that if such day is not a Business
Day then the notice shall be deemed to have been given and received on the
Business Day next following such day. Any notice mailed as aforesaid shall be
deemed to have been given and received on the fifth Business Day next following
the date of its mailing. Any notice transmitted by facsimile or other form of
recorded communication shall be deemed to have been given and received on the
date of its transmission provided that if such day is not a Business Day or if
it is received after the end of normal business hours on the day of its
transmission then it shall be deemed to have been given and received at the
PAGE 46
opening of business in the office of the addressee on the first Business Day
next following the transmission thereof.
Any party hereto may change its address for service from time to time
by notice given to the other parties hereto in accordance with the foregoing.
12.4 TIME OF THE ESSENCE
Time shall be of the essence of this Agreement.
12.5 EXPENSES
All costs and expenses (including, without limitation, the fees and
disbursements of legal counsel) incurred in connection with this Agreement and
the transactions contemplated hereby shall be paid by the party incurring such
expenses. No professional fees or expenses in connection with this transaction
shall be borne by the Corporations, unless otherwise agreed to in writing by the
Purchaser.
12.6 APPLICABLE LAW
This Agreement shall be construed and enforced in accordance with, and
the rights of the parties shall be governed by, the laws of the Province of
British Columbia and the laws of Canada applicable therein.
12.7 ENTIRE AGREEMENT
This Agreement, including the Schedules hereto, constitutes the entire
agreement between the parties hereto with respect to the transactions provided
for herein and cancels and supersedes any prior understandings, agreements,
negotiations and discussions between the parties hereto with respect thereto,
except as stated herein and in the instruments and documents to be executed and
delivered pursuant hereto. This Agreement may not be amended or modified in any
respect except by written instrument executed by each of the parties hereto.
12.8 EFFECT OF CLOSING
Any provision of this Agreement which is capable of being performed
after but which has not been performed at or before Closing and all covenants
contained in or entered into pursuant to this Agreement, including the indemnity
covenants, shall remain in full force and effect notwithstanding Closing.
12.9 COUNTERPARTS
This Agreement may be executed in two or more counterparts, each of
which shall be deemed to be an original and all of which together shall
constitute one and the same agreement.
PAGE 47
12.10 ASSIGNMENT
This Agreement may not be assigned by the Vendor without the prior
written consent of the Purchaser but may be assigned by the Purchaser without
the consent of the Vendor to an Affiliate of the Purchaser, provided that such
Affiliate enters into a written agreement with the Vendor to be bound by the
provisions of this Agreement in all respects and to the same extent as the
Purchaser is bound. Notwithstanding the foregoing, the Purchaser will continue
to be fully bound by the terms of this Agreement following such assignment.
12.11 PARTIES IN INTEREST
This Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective heirs, executors, successors, including any
successor by reason of amalgamation of any party, administrators and permitted
assigns.
12.12 SEVERABILITY
If any paragraph or part or parts of paragraphs in this Agreement are
determined to be illegal or unenforceable, it or they shall be considered
separate and severed from this Agreement and the remaining provisions of this
Agreement shall remain in full force and effect and shall be binding upon the
parties hereto as if such paragraph or paragraphs or part or parts of the
paragraphs had never been included.
ARTICLE 13. NON-COMPETITION
13.1 The Vendor agrees that it shall not from the date hereof for a
period of 5 years directly or indirectly (whether through a company, partnership
or as an employee or representative of any other person or otherwise) approach
or solicit any customer of the Corporations or the Purchaser for the purpose of
providing to that customer products or services similar to that offered by the
Business or attempt to direct any customer or potential customer away from the
Purchaser or the Corporations or establish, carry on, be engaged in or be
concerned with or interested in or advise, lend money to, guaranty the debts or
obligations of, or permit the Vendor's name to be used or employed by, any
person or persons, firm, association, syndicate or corporation engaged in or
concerned with or interested in, any similar business or a business offering the
same or other similar services or products to those which the Corporations
before the date hereof offered in operating the Business, as the case may be, or
allow the Vendor's name to be used in connection with any such business, within
any state or province in which any of the Corporations currently carry on
Business.
Notwithstanding the foregoing, it shall not be a breach of this
Agreement if DQE Inc. or the Vendor, or either of them, is after the date hereof
acquired (whether by sale of stock or assets) by another entity that engages in
a business that competes
PAGE 48
with the Business so long as none of the current officers, directors or
employees of DQE Inc., the Corporations or the Vendor is involved in such
competing business.
13.2 The Vendor shall not at any time hereafter communicate or divulge
to any person any confidential information concerning the Business, whether for
their own benefit or to the detriment or intended or probable detriment of the
Purchaser.
13.3 The Vendor acknowledges that there is a proprietary interest in
the names "Pure Spring", "Polaris", "Ever Clear Water", "Cool Water", "Whistler
Water" and all other business names which belong to the Corporations and that it
shall not at any time operate any business using such names or a variation
thereof or a name which might be confused or associated with such names at any
time hereafter while the Corporations or its successors or assigns may continue
to use such names.
13.4 The Vendor agrees not to solicit, divert, employ or attempt to
employ any of the employees of the Corporations for a period of 5 years from the
date hereof.
13.5 The Vendor acknowledges that:
(a) the restrictions contained in this Agreement are reasonable in
order to protect the legitimate business interests of the
Purchaser; and
(b) a breach by the Vendor of any of the provisions of this
Agreement could result in damage to the Purchaser or the
Corporations or both for which they may not be adequately
compensated for such damages by monetary award. Accordingly,
in the event of any such breach, in addition to all the
remedies available to the Purchaser or the Corporations at law
or in equity, the Purchaser or the Corporations may seek a
restraining order, injunction, decree or other remedy to
ensure compliance with this Agreement.
PAGE 49
IN WITNESS WHEREOF this Agreement has been executed by the parties
hereto.
SIGNED AND DELIVERED )
in the presence of: )
)
) AQUASOURCE, INC.
)
)
_______________________________ ) Per: ________________________________
Witness ) Xxxxxx X. Xxxxxx, Vice President
)
)
) SPARKLING SPRING WATER
) HOLDINGS LIMITED
)
)
_______________________________ ) Per: ________________________________
Witness ) Xxxxxx Xxxxxxxx, Chief
) Financial Officer
